Oriental Aromatics LtdQ1 FY23Chemicals & Petrochemicals

Oriental Aromatics Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 5

Margin

Category 4

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 5

→The company anticipates a challenging next 2-3 quarters with subdued demand and pricing pressures, especially in camphor and aroma chemicals divisions.
→Strong growth is expected in the fragrance division driven by new wins and participation in more projects, though overall industry growth is uncertain.
→Capacity expansions (Brownfield and Greenfield) are ongoing, expected to complete by FY24, potentially enabling higher volumes in 2-3 years.
→Management aims for profitable growth focusing on efficient raw material procurement, cost reduction, and process improvements rather than just volume increase.
→Stabilization of demand and pricing is expected after 2-3 quarters, potentially leading to stable EBITDA and higher sales clarity thereafter.
→Due to prevailing uncertainties in raw material prices, demand, and competition, precise revenue or volume guidance is deferred until clearer market conditions emerge.

Category 4

→The company expects a challenging next 2-3 quarters due to subdued demand, pricing pressure, and external factors, particularly in camphor and aroma chemicals.
→Management is focusing on internal process improvements and productivity enhancements to remain lean and profitable when demand stabilizes.
→They are cautious about providing specific guidance for turnover or earnings in the near term due to volatility in raw material prices and market conditions.
→Capex of around ₹200-205 crore (Baroda, Bareilly, Mahad) is planned for FY24, which will support future capacity and growth once market conditions improve.
→Emphasis remains on profitable growth rather than volume growth alone, aiming to optimize margins via raw material procurement and operational efficiencies.
→Recovery and upward trajectory in earnings, ROE, and ROCE are expected to become clearer after 6-8 quarters when the market stabilizes and new capacities come online.

Get access to all 5 sections — revenue, margin, fundraise, orderbook, and capex — for Oriental Aromatics Ltd and 1,400+ other companies.

Yes

→The company is undertaking a phased investment approach, currently piloting the CSTP before proceeding with further investments.
→Peak debt levels by the end of the current year are expected to be around ₹370-450 crores.
→For ongoing and planned CAPEX (Baroda, Mahad, Bareilly), the company plans to fund approximately 70-75% of the total project cost through debt.
→Mahad project’s total planned investment is about ₹100 crores, with ₹25-32 crores already invested.
→No explicit mention of raising equity funds in the transcript.
→Focus remains on managing internal operations and strategic investment phases with controlled debt funding aligned to project progress.

→The company indicated that for H1 2023, customer RFQs (Request for Quotations) allocations have been honored to about 60-70%, with the remaining either postponed or canceled, reflecting softness in demand.
→Inventory buildup is relatively high due to postponed procurements by global customers and slowdown in Europe and America.
→There is a challenging environment with subdued demand and oversupply, especially in the camphor market.
→Due to these factors, a clearer picture on order book stabilizing is expected only after two to three quarters.
→The management prefers not to provide firm guidance at this moment due to market uncertainties.
→They are seeing increased participation in new fragrance and flavor projects which is helping the fragrance division grow despite overall market challenges.

Yes

→The company has ongoing and planned capex across multiple locations: Baroda, Bareilly, and Mahad.
→Baroda capex balance is around ₹100 crore; Mahad greenfield project expected cost is ₹92-100 crore; Bareilly capex remaining is small (₹6-7 crore).
→Total capex planned for FY24 is about ₹200-205 crore.
→Debt funding expected at 70-75% of total project cost, with peak debt around ₹370-380 crore by year-end.
→Mahad project is phased, with ₹25-32 crore already invested; total planned investment about ₹100 crore.
→The new plant validation and market capture are expected over 6-9 months, aiming to capture 40-50% market share within 2.5 years.
→The company continues to invest strategically while focusing on derisking and China Plus One strategy despite market challenges.
→Expansion including the CSTP project expected to complete mostly by FY24.

How does Oriental Aromatics Ltd rank vs peers in Chemicals & Petrochemicals?

Pro feature

1Oriental Aromatics Ltd

Rev 5Mar 4

See full Chemicals & Petrochemicals sector rankings

Want more stocks like Oriental Aromatics Ltd?

Build an AI portfolio filtered by sector, market cap, and growth rank. Takes 2 minutes.